NEW YORK (CNN/Money) -
United Airlines reached a tentative agreement on its last outstanding labor contract with the union representing about 23,000 customer service, ramp workers and other employees, a costly new contract that will make the union members the industry's best paid for their job classes but opens the way for concession talks.
The new contract with the International Association of Machinists would raise pay by 23.1 percent at the date of signing, to $24.59 an hour for customer service representatives and $23.49 an hour for ramp workers. Each will receive a 3.5 percent raise next year and in 2004 under the contract. The agreement, reached Thursday evening, is subject to a rank and file ratification vote.
Despite the cost of the agreement and ongoing losses at United's parent company UAL Corp. (UAL: Research, Estimates), the company's stock closed up 50 cents, or 3.5 percent, to $14.92 in Friday trading. A contract with industry-leading wages had been widely expected and the agreement is seen as a way the airline can move ahead in its efforts to reach broad wage concessions.
The Air Line Pilot Association issued a statement late Friday afternoon saying it would join talks on a "global recovery program."
"We are confident that a properly constructed financial program will position United to solidify and grow its network as the industry recovers," said a statement from Capt. Paul Whiteford, chairman of the union's unit at United.
But the Association of Flight Attendants issued a statement saying it would not participate in the talk. The AFA, unlike the pilots and machinists, is not a participant in the employee stock ownership program that owns a majority of the company.
"We take exception to the company's characterization that our costs are the reason for United's financial woes," said a statement from AFA United Master Executive Council President Linda Farrow. "In fact, our contract ensures that United's flight attendant costs are similar to the average flight attendant costs of United's major competitors. Nothing could be more competitive than that."
United issued a statements saying it was gratified by the pilots' statement and disappointed by the AFA stance.
"I'm pleased that the leadership of the ALPA recognizes the importance of a cooperative and consultative approach to the successful implementation of United's financial recovery plan," said a statement from UAL CEO Jack Creighton. "All we asked of any union was that they sit down and talk to us. We are disappointed in today's statement from the flight attendants union, which we believe was premature."
The IAM did not attend meetings between labor and management about possible concessions, according to the airline, and the union did not have any immediate statement about its plans.
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While UAL management has spoken of the need for "sacrifices" from its unions, the IAM argued its members should receive the raises and retroactive pay won by the pilots and flight attendants prior to Sept. 11, before it joined in concession talks.
The IAM took mechanics at United to a brink of a strike before reaching an industry-leading contract for those members. A statement by United management after the agreement said that it was a step that needed to be taken before the start of concession talks.
"Reaching agreement with (the IAM) is a critical milestone in developing a recovery plan that meets the needs of passengers, preserves jobs, and puts the company on the road to financial stability," said a statement from Creighton.
The IAM has added leverage in that its members collectively own about 20 percent of the nation's largest employee-owned company, and the union and ALPA each have a representative on the company's board of directors.
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Creighton was named CEO last fall after the IAM called for the removal of former CEO James Goodwin for comments he made questioning the future outlook of UAL in the face of post-Sept. 11 losses.